I have seen this error two times before when i try to build WPF and WindowsPhone application .I had a hard time with this issue.

How to resolve this error?

Open the Run window and type regedit 

Click OK and then Navigate to HKEY_LOCAL_MACHINE\System\CurrentControlSet\Control\Lsa 

DELETE this registry entry by right clicking the FipsAlgorithmPolicy folder and restart the application.It will resolve the issue